Experian slumps as credit worries weigh on London

FTSE 100 closes down 1.1%; Barclays' shares fail to sustain gains

By

SarahTurner

LONDON (MarketWatch) -- Signs that the credit crisis is hurting companies outside the banking sector emerged Thursday as Experian warned that it expects weaker market conditions to hit revenue, prompting large-scale selling in the credit-check company's shares and adding pressure to a weak London market.

Shares of Experian (EXPN), part of London's top FTSE 100 index, slumped 9.5 % to just under 430 pence. They touched a new annual low of just over 384 pence in the session.

The weakness followed a company statement that organic revenue growth slowed in the second quarter, down to 6% as opposed to 7% reported for the first quarter and 8% for fiscal 2007.

Management also expects revenue growth to continue to slow in the second half of its fiscal year, a reflection of tough conditions in the credit market.

"We think that management guidance implies second-half growth of 4% or less, versus our forecast of 6%," said analysts at Citigroup in a note.

Since mid-July, Experian's shares have declined by a little more than 30%.

"The shares have come back sharply on fears of a substantial downturn, and the company took exception to our suggestion that less credit-market activity would lead to less credit-rating activity," said Kevin Lapwood, analyst at Seymour Pierce.

"They are now stressing that their debt-collection services are in demand and that they will continue to make progress even as lenders become more risk averse," he noted.

Experian reported that first-half profit edged up 4% to $224 million after revenue climbed 12% to $215 million, and the company held firm to its fiscal-year profit target.

FTSE index slides

Meanwhile, the FTSE 100 (UKX) closed down 1.1%, shedding 72.50 points, to 6,359.60. The London benchmark was paced by losses in the banking, real estate and mining sectors, while other European stock markets also lost ground. See Europe Markets.

Shares of Barclays
BCS, +0.31%
(BARC) traded in a volatile pattern in London, moving back from sharp gains to close down 0.5%.

The lender earlier said it would have to write down 1.3 billion pounds ($2.7 billion) from subprime lending and the related credit crunch at Barclays Capital, its investment-banking unit, but this proved to be far lower a provision than rumors in the markets had suggested. See full story.

Other banks under pressure included Royal Bank of Scotland (RBS), shares of which fell 4%, as investors wait for an update akin to Barclays and other banks.

Profit updates in other sectors failed to provide much inspiration. Shares of catering group Compass (CPG) fell 3.5%, pulling back after peer Sodexho-Alliance reported a below-forecast net profit rise.

And shares of SABMiller (SAB) fell 3.1% as the brewing group said its operating environment is expected to get more challenging.

SABMiller reported that first-half net profit rose to $1.1 billion, up from $908 million last year. "We expect to make progress in the balance of the year, but face a more challenging environment," the company said. See full story.

However, analysts at Dresdner Kleinwort advised that they would want to own the stock in the medium term, saying: "North America is clearly back on track and South Africa is not the problem child the market made it out to be, but Latin America disappointed."

Scottish & Newcastle gains, Ladbrokes retreats

Rival brewers Carlsberg and Heineken (00916) increased their offer for Scottish & Newcastle by 4% to 7.3 billion pounds ($15 billion). It's a bid that remains below the stock-market value of the U.K. brewer of John Smiths and Newcastle Brown. See full story.

Meanwhile, shares of Ladbrokes (LAD) tumbled 9.4%.

The world's largest fixed-odds bookmakers said that a decrease in money staked on horse racing in part due to race cancellations, and unfavorable results in football meant that its U.K. retail operations put in a below-target performance for the four months to the end of October.

"Excluding telephone high rollers, gross win increased 7%, which was below our expectation of 10%," said analyst at Numis Securities.

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